Globalization & Welfare State Lecture Notes PDF

Globalization & the welfare state Labour market flexibility, social investment & dualization Lecture 4 – Globalization & Social Risks Outline of today Globalization & welfare in the West The role of the labour market: flexibilization The role of the welfare state: Retrenchment?...

Globalization & the welfare state Labour market flexibility, social investment & dualization Lecture 4 – Globalization & Social Risks Outline of today Globalization & welfare in the West The role of the labour market: flexibilization The role of the welfare state: Retrenchment? Expansion? Restructuring? A story of “dualization” So far... Increase in globalization Changing Global income distribution LCT3 & SEM3 LCT4 In the West In the ‘Western’ world Slow economic growth Rising within-country income inequality (Figure 1.3) Lower income groups struggling (Figure 1.2) How can we explain this rising inequality? Where do people get their ‘disposable income’ from? Labour market labour market income (earnings) LM changes explain rising inequality LM flexibility: persuade employers to hire more people – facilitate hiring & firing Welfare state ‘disposable income’ = labour income - (taxes and contribution) + (social transfers) WS changes explain rising inequality Social investment & active labour market policies: make people more employable Welfare conditionality: tightening of social protection Labour Market Flexibility Impact of Globalization = from industrial to post-industrial knowledge LMs Offshore outsourcing of industrial jobs Long term, structural unemployment (especially among the low-skilled) Solution: Labour market Flexibility allows companies to make quick decisions about their labor force in response to market changes reduces macro economic risks for firms by lowering the cost of employment Safeguards ‘the West’ as interesting investment region for firms Reduces unemployment Labour Market Flexibility I Forms Outsourcing – freelancers Functional flexibility – role variation Wage flexibility – wage adjustments Numerical flexibility – shrink core of workers with permanent contracts + increase numbers of workers with flexible contracts Temporal flexibility – working time/hours Labour Market Flexibility II Individual level consequence = decline of Standard Employment Relationship From stable, full-time, full-life, (male) full employment and full-welfare entitlements To fixed-term work, temporary/agency, part-time, ‘fake’ self-employment with limited welfare entitlements Different names: non-standard, a-typical, insecure PRO: attractive work-life balance, sense of control,... CON: poorer labour conditions, less protection, pays less, less training, higher unemployment risk, etc. Labour Market Flexibility III: how extensive? Labour Market Flexibility IV: where? Labour Market Flexibility IV: where? EPL= Employment Protection Legislation Labour Market Flexibility V: a risk? Labour Market Flexibility V: a risk? ‘exclusionary’ vs. ‘integrative’: stepping stone or not? Individual level: NSE for routine-manual labour (The Replaceables) Prosperous permanent: 41,5% Precarious permanent: 15,8% Fortunate fixed-term: 8,0% Shift to self-employment: 6,0% Passing permanency: 2,8% Infinite insecurity: 12,2% Employment exit: 13,7% Labour Market Flexibility V: a risk? ‘exclusionary’ vs. ‘integrative’: stepping stone or not? Individual level: NSE for routine-manual labour (The Replacables) System level social-democratic welfare states: ‘flexicurity’, also NL; all work is more or less protected Liberal countries: stepping stone, integrative, but: all work became more precarious conservative-corporatist variations: trap, exclusionary; insider-outsider divide Welfare State response  Old, ‘simplistic’ debate Mixed evidence, but 1990’s, economists compensation rather than efficiency… Efficiency hypothesis Race to the bottom (Ritzer & Dean, chapter 7) Increased power of ‘capital’ over ‘labour’ Financing problems Compensation hypothesis ‘automatic spending’ Political: increased demand for spending and compensation of jobloss Early retirement – ‘exchange politics’ in conservative-corporatist countries Why simplistic? Countries with largest / most generous welfare states tend to be small countries with very open economies scoring high on G-measures (clustering of countries that is not random and ‘forces’ correlations between globalization and spending into a specific direction when assessing between-country variations…) Methodologically unsound: low N, unspecified DV, correlational, between countries (not evolution within), no test of mechanism,... theoretical & methodological advancements Busemeyer (2009) – 21 OECD countries, 1980-2004 Taking ‘time’ seriously: DV = state spending Explicit focus on modelling within-country change over time separating levels from changes Impact of globalization on welfare states does not happen overnight Different indicators of ‘spending’ as dependent variable Different indicators of ‘globalization’ Impact of globalization on spending has become negative over time Within countries, more globalization leads to less spending From compensation (initially) to negative impact of globalization on welfare state spending (but not ‘efficiency’)  Nam (2020) – 16 countries, 1980-2010 Focus on ‘compensation’: which welfare states compensate for ‘distributional consequences’ of globalization (i.e. rising income inequality) DV = ‘Market income inequality’ vs. ‘disposable income inequality’ Glob: Trade openness (trade volume, LDC imports), financial openness, immigration WS : Focus on ‘generosity of unemployment’, limiting sample to working age population Control variables: other determinants of income inequality Focus on between-country variations Results All globalization variables impact positively on market income inequality Lesser and smaller positive significant effects on disposable income inequality, large negative effects of welfare generosity Positive effect of globalization on disposable income inequality is smaller in countries with more generous unemployment insurance (interaction) More ‘efficiency’ in liberal welfare states Conclusion? Not Retrenchment/efficiency (too simplistic a mechanism) Not Compensation: U-curve response: increase over time Variation across Welfare States The mechanism?  Revitalized debate in terms of ‘dualization’ = indirect impacts of globalization on social risks via interplay between welfare states and labour markets ‘Dualization’ Downward dualization ‘drift’ subtle, incremental process != one big policy measure “a 1000 cuts over time” = slow Various factors: globalization, population aging,... Two related processes A process of less inclusiveness on the labour market: LM insiders vs outsiders A process of less inclusiveness in terms of social insurance: insurance in vs outsiders  Both processess are related and reinforce each other How dualization came about I Welfare state origin: case of full employment horizontal redistribution – (almost) everyone contributes and collects Insurance > assistance How dualization came about II Globalization = Structural unemployment Solution1: early retirement  financial issues Solution2: LMF + making social protection stricter From ‘passive’ compensation To Social investment & ALMP Result = recommodification  Consequences Social polarization between ‘losers’ and ‘winners’ => ‘our boats now have different sizes’ Horizontal redistribution becomes more and more restricted to insiders (winners of globalization) Welfare states became less ‘pro-poor’ : decreasing solidarity Class risks became more stratified new risk groups are also very heterogenous Variation across Welfare States  Welfare State: variation Numeric flexibilization: Wage flexibilization: ‘extreme’ insider/outsider working poor, income divide => young polarization Active labor market High protection for core policies, expansion of male/union workers, social services, social (early retirement), protection of flexible flexibilisation of labor work => expensive for ‘outsiders’/at the Esping-Andersen, margins => low-skilled 2002; Barbieri, 2009; Dewilde 2020 Conclusion I Welfare state type/labour market Social risks: class, life course, intergenerational Globalization Outcomes: poverty, inequality, polarization Welfare state Labour markets (employment structure, wages) => transformation of social risks => within-country inequality => welfare state restructuring Conclusion II 1. The impact of globalization on social risks and the welfare state is primarily indirect. 2. Processes of globalization interact with ‘local’ institutionalized power structures (in particular nation-(welfare) states) and local cultures, and therefore lead to diverse outcomes in different countries and social groups. 3. Globalization decreased global inequality (i.e. between countries), but it tends to increase within-country inequality because it intensifies existing inequalities. Social polarization results from increased differences between ‘losers’ and ‘winners’. Such polarization undermines the ‘social contract’ on which welfare states are based. Conclusion III 4. (Economic) globalization has had little direct impact on welfare states, but has transformed ‘old’ social risks and created ‘new’ social risks (partly through the flexibilization of labour markets). Globalization has thus a larger indirect impact on welfare states by changing the nature of social risks, which prompts further policy reform and leads to ‘uncertainty’, which in turn impacts on individual life courses. 5. Globalization requires responses and policy-coordination (a new ‘social contract’) at a higher level (i.e. Europe, the world), but collective action of this sort can become problematic or even impossible. Global problems require coordination of actions of nation-states (e.g. the ‘European Social Model’, climate treaties, …), but its outcomes are more diffuse and uncertain.